IBM homes in on its competition

SBHD: A one-agency campaign heralds IBM’s comeback but how healthy is the brand underneath?

The first fruits of IBM’s controversial global marketing shake-up appear in the US this week. The computer giant’s global TV advertising campaign through its agency Ogilvy & Mather will break, and reach the UK in three weeks.

It is the start of a 12-month battle to rebuild IBM’s tarnished image and re-establish it as the technology market leader, preventing its widely predicted downfall.

According to US sources, O&M’s initial campaign will consist of a series of humorous TV ads featuring unlikely technology users from around the world. Subtitles will be used to show that users are discussing IBM products. Ads will also appear in the press and on radio.

The global branding campaign will take up the bulk of IBM’s $300m advertising budget. It will aim to rebuild the IBM brand and open up its appeal to home users.

But IBM chief executive officer Louis Gerstner has a long way to go before textbook disaster changes to textbook success. At first glance he already appears to be succeeding.

The computer giant has managed to convert an $8.5bn loss in the third quarter of 1993, into profits of $689m for the same period of 1994.

However, these figures do not indicate the wider weaknesses. The bulk of 1993’s $8.5bn loss went on a restructuring programme, which involved the planned lay-off of 35,000 workers by the end of 1995.

IBM’s mainframe and minicomputer businesses, on which it built its name and profits, have been badly eroded by the advent of cheaper, easier-to-use PC technology. Its PC business, once the sales leader, has been hit by cheaper imitations.

According to third-quarter 1994 figures from market research firm Dataquest, IBM has now dropped to fourth place in PC sales behind Apple, Compaq and Packard Bell.

In addition, IBM’s struggling software operating system OS/2 only has a 7 million worldwide installed base, way behind the estimated 50 million users for the rival Microsoft Windows system. The company is also losing marketing talent. Last year, IBM UK marketing chiefs Howard Ford and Steve Rowley left to join Cellnet. At the time, Rowley partly attributed his departure to the recently-appointed chief executive officer Gerstner’s decision to centralise all IBM’s marketing operations in the US.

A revamped marketing strategy is central to IBM’s fight to regain its industry leadership. Gerstner was appointed in April 1993. He had made his name as a marketing guru at American Express and RJR Nabisco and clearly intends to maintain his reputation as a tough marketer at IBM.

In the past year alone, Gerstner has backed the set-up of a competitive marketing department designed to work out how to woo users from competing systems. He supervised the consolidation of IBM’s nine PC sub-brands into just four lines, replacing acronym-littered brand names such as PS/1, PS/2 and ValuePoint with the friendlier title of the IBM PC. Likewise, IBM’s OS/2 version 3.0 operating system software update was renamed Warp.

He also masterminded the axing of 40 agencies and some 100 campaigns in favour of a one-agency – Ogilvy & Mather – approach last May.

With its mix of agencies and conflicting local marketing strategies, IBM’s marketing had suffered from having diverse and conflicting messages across its product lines.

Last summer alone saw a raft of interpretations of the IBM brand across the country. Graffiti-covered billboards carried ads for IBM’s AS/400 computers. They sat next to arty ads for its OS/2 software carrying unfathomable slogans such as "Nobody gets rich on potential" and "Don’t crawl".

Meanwhile, the cartoon figure of the Pink Panther was advertising IBM’s helpline service and IBM’s marketing team was toying with the idea of sponsored pop songs, free trips to the moon with software purchases and software giveaways with Smarties packets.

"I’m delighted we have moved to a single advertising agency," says marketing communications manager Malcolm Grieg. "We found ourselves with a proliferation of differing campaigns and messages. It just confused and antagonised people."

IBM’s rationale is simple; as product difference in the computer market is reduced, manufacturers are seeking difference through campaigns which build up brand image. IBM is not alone in its thinking. Technology companies Intel, Microsoft and Sun Microsystems have all begun similar branding campaigns.

But analysts question the strategy. Rather than developing a brand image, O&M’s campaign runs the risk of simply celebrating the omnipotence and power of the IBM brand, they say.

Jim Brennan, senior director at US analyst Workgroup Technologies, says the centralisation of marketing activities together with a global advertising agency and global branding campaign is a mistake. "If global branding is IBM’s strategy, then all I can say is good luck," he adds.

Brennan says IBM is often perceived as a monolithic, bureaucratic organisation, and the new strategy will only enforce this image. "IBM is still coming across as a monolith and that is its problem. The mystique has gone out of technology. Users don’t want a one-stop shop anymore," he says.

According to Brennan, computer companies should still focus on product benefits, rather than image: "This is a commodity market and users want to know how good the products are."

Gerstner has already achieved a great deal. But the next 12 months will be the most difficult. It is not just Gerstner’s reputation as a marketing guru that will ride on this branding campaign, but the future of the largest and most pervasive computer company in history.